Bitcoin fell below $27,000 for the first time since December 2020 as the cryptocurrency sell-off deepens.

Bitcoin fell further below the $30,000 level as investors left the cryptocurrency.

Jaap Arriens | Nourfoto | Getty Images

Bitcoin plunged below $27,000 for the first time in 16 months on Thursday as the cryptocurrency market expanded losses on fears of rising inflation and the collapse of the controversial stablecoin project.

According to Bitstamp data, the price of Bitcoin fell to $26,595.52 on Thursday morning. This is the first time Bitcoin has fallen below $27,000 since December 30, 2020.

As of 1:30 AM EST, Bitcoin was trading at $27,061, down 15% in the last 24 hours.

Ether, the second largest digital currency, fell to $1,789 per coin. It is the first time the token has fallen below $2,000 since July 2021.

Ether fell 23% to $1,852.

Investors are avoiding cryptocurrencies at a time when stock markets plunged at the peak of the coronavirus pandemic on fears of a surge in stock prices and a worsening economic outlook.

US inflation data released on Wednesday showed that prices for goods and services rose 8.3% in April, higher than analysts had expected and close to a 40-year high.

Also weighing on traders’ hearts is the collapse of the cornered stablecoin protocol Terra.

TerraUSD (UST) should reflect the value of the dollar, but plunged below 30 cents on Wednesday, shaking investor confidence in the so-called decentralized finance space.

Stablecoins are like bank accounts in the cryptocurrency world with little regulation. Digital currency investors often look to cryptocurrencies for safety when the market is volatile.

However, the “algorithmic” stablecoin UST, backed by codes rather than cash held in reserves, struggled to maintain a stable value as holders sought exit in bulk.

As of Thursday morning, UST is trading at around 62 cents, still well below its intended $1 peg.

Luna, another Terra token that has a floating price and is intended to absorb UST price shocks, erased 97% of its value in 24 hours, with a final value of just 30 cents less than UST.

Investors fear the impact of Bitcoin. Luna Foundation Guard, a fund founded by Terra founder Do-kyung Kwon, has raised billions of dollars in Bitcoin to support UST during a time of crisis.

The fear is that the Luna Foundation Guard will sell a significant portion of its Bitcoin holdings to support the ailing stablecoin. This is a risky gamble, especially since Bitcoin itself is an incredibly volatile asset.

Adding to investor fears on Thursday was the decline in the value of tether, the world’s largest stablecoin. At one point, the token slid below 99 cents. Economists have long feared that Tether may not have the necessary reserves to bolster its dollar peg in case of mass withdrawals.


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